CPEC Brings Regional Economic Integration: Now Joins Iran

It doesn’t take extraordinary intellect or theoretical insight to understand that economic integration, alliances, and trading blocs are fundamental elements of the contemporary world order. Amassing conventional military weapons and going into direct wars with rivals is a less popular option today and instead, establishing new and mutually beneficial trade patterns and economic policies are the more attractive choices. The evolution of the European Economic Community (EEC) into a successful European Union (EU) and the transformation ofSouth East Asian economies into astonishing Asian Tigers show that economics outmaneuvers politics.

Pakistan’s offer for Iran to join the game-changing China-Pakistan-Economic-Corridor (CPEC) is a step toward regional economic integration which could indeed transform the entire regional socio-economic fabric. The CPEC is a project that has brought Pakistan and China closer, while China eyes Gulf States and the Middle East as strong future markets. At the moment, Chinese trade with these two regions is at a lower level compared to its trade with other parts of the world. Since China sees trade and soft power as means to stretch muscles overseas, it has taken giant strides. Pakistan’s offer to Iran is certainly not against Chinese interests, since Beijing has well adhered to regional economic integration doctrines over the years. Iran’s entry in the CPEC would enable China to bring the region under the vortex of its economic, and to some extent political, influence.

Iran recently concluded a nuclear deal with world powers; therefore, the threat of being hindered by sanctions no longer overrides the expansion of business activities. Urging Iran to join the CPEC is a calculated risk, yet also a positive development, taken by both Pakistan and China for mutual economic gains. China was a lively participant in the nuclear talks and played a significant role in concluding the agreement between Tehran and the West. China was paving the way for dialogue and Chinese Foreign Minister Wang Yitraveled from Beijing to Ufa, Vienna, and other places just before the deadline on nuclear talks was approaching. Wang’s efforts were aimed at bringing both sides to the table so as to fix the issues through talks instead of entangling in confrontation. Furthermore, China is a major importer of Iranian oil, and it surpassed the European Union to become Iran’s largest trading partner with bilateral trade reaching $51.9 billion in 2014. Similarly, Iran also has no misgivings over China and has sought larger Chinese investment in its domestic infrastructure. Tehran hopes for a flurry of cheap products in its markets post- nuclear deal and after the completion of the CPEC. Several Chinese companies have started investing in Iran in the oil and gas sectors. Chinese Zhuhai Zhenrong Corporation, which was under U.S. sanctions, negotiated with the National Iranian Oil Company for getting contracts in the Iranian oil and gas sectors.

Iran may have wished for large investments from China, but it has also knocked at India’s door for assistance in building the Chabahar port. Two Indian companies, namely the Kandla Port Trust and the Jawaharlal Nehru Port Trust, have pledged to invest $100 million for the upgradation of the port. In the gradual but impactful new “Great Game” in the region, one cannot discount active Indian political and economic manipulations. India eyes its Central Asian and European ambitions by using the Chabahar port and Afghanistan. Meanwhile, the Iranian interest in CPEC is a serious setback for Indian foreign policy towards Iran. India wishes for Central Asian and European access by using the Chabahar port, thus bypassing Pakistani territory and dodging Chinese assistance to Iran. However, Tehran’s entry in the CPEC could bring in larger economic partaking for Islamabad and Beijing alike.

Iran’s possible inclusion in the CPEC could give Pakistan relief in many ways. Pakistan is an energy-deficient country and continuously seeks cheap energy from all means. Iranian gas is an option that Pakistan wanted to grab earlier; however, the nuclear deadlock between the P5+1 and Iran was a major impediment. Since the sanctions on Iran are gradually being removed, Islamabad is trying to materialize on the Iran-Pakistan (IP) gas pipeline project as early as possible. Furthermore, Pakistan and Iran can discuss the issues pertinent to both the Chabahar and Gwadar ports. It is widely believed that the location of the Gwadar port can easily overrun the strategic advantage of Chabahar, and thus the Iranian port may not be effective. As New Delhi finances construction of the Chabahar port, many inside Pakistan claim that India is financing terror in Baluchistan province of Pakistan in a bid to offset Chinese and Pakistani commitment of utilizing the port for trade with Gulf States and the Middle East. If the Gwadar port becomes operational with full capacity, the significance of Chabahar may diminish and Indian investment on it may also be in vain.

Who does not want advantages from economic integration in the region, similar to the EU or in Southeast Asia? Everyone contiguous to the CPEC would wish to be a part of it to enjoy the liberty of trade, culture, and prosperity alike. However, there is a certain way to enjoy the fruits of this mega-project. One may opt the right way, which is to become a vibrant participant in the project and get access to the entire region through the Silk Road and beyond, while others can go toward a more destructive path, which would only unleash mutual destruction. Inviting Iran in the CPEC is a win-win situation for all the parties as the project gives a new life line to Pakistan and Iran and a cheap, yet safe, way to China for its Middle East quest.

Muhammad Daim Fazil

Muhammad Daim Fazil is a lecturer in the Department of International Relations at the University of Gujrat, Sialkot Campus, Pakistan. He was an SAV Visiting Fellow from July through December 2016. He has previously worked as a Media Researcher and Coordinator at Pakistan's state-run TV channel PTV NEWS. He holds an M.Phil degree in International Relations from National Defence University, Islamabad and currently pursuing his PhD in International Relations from the University of Punjab, Lahore. His work has been featured in The Diplomat, The Print, The National Interest, and others.